Reference no: EM132892337

You obtain the following information from the final prospectus (Form 424B4) filed with the Securities and Exchange Commission (SEC) before Alibaba Group's IPO.

• "This is the initial public offering of Alibaba Group. We are offering 123,076,931 American Depositary Shares, or ADSs, and the selling shareholders named in this prospectus, including Yahoo, one of our principal shareholders, Jack Ma, our executive chairman, and Joe Tsai, our executive vice chairman, are offering, in the aggregate, 197,029,169 ADSs. Total number of ADSs to be offered is 320,106,100 shares. Each ADS represents one ordinary share. The initial public offering price of the ADSs is US$68.00 per ADS. Prior to this offering, there has been no public market for our ADSs or ordinary shares. Our ADSs have been approved for listing on the New York Stock Exchange under the symbol BABA. The underwriting discounts and commissions given to our underwriters were $0.816 per ADS. We, Yahoo, Jack Ma and Joe Tsai have granted the underwriters the right to purchase up to an aggregate of 48,015,900 additional ADSs to cover over-allotments."

• Alibaba's stock (NYSE:BABA) closed at $89.80 on the first trading day (September 22nd, 2014) and at $177.39 three years after the IPO date (September 21st, 2017). Calculate the annualized return an investor would have received if she had invested in Alibaba at the closing price on the first trading day and sold the stock three years later at the closing price on September 21st, 2017.

Problem 1: How does this compare to the long-run performance of a typical IPO stock?